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Historically speaking since the Real Estate Crash of 2006, people who lost their homes to short sales or foreclosures or even did loan modifications, received a 1099 for the forgiven debt. The lenders sent them the 1099 identifying how much debt that was forgiven. The state of California treats the forgiven debt as taxable income and reported on your tax return and subject to income tax.

This could of been devastating to the already millions of distressed home owners. To provide relief, Congress passed the Debt Forgiveness Relief Act of 2007 which provided a tax exemption for personal residences. The Act expired in 2009 and then extended. Most states matched the Feds in approving the relief. Again the Act expired in 2013 and again it was extended to the end of 2014.

To this date there is no relief for 2015. There are 2 bills on the table for tax relief in 2015.

For any home owners who may be facing a future short sale in 2015, it is important to talk with are tax professional to see if they qualify for exemption from this tax because of their hardship and debt status. Some may find out that they will not owe any tax even if the Debt Forgiveness Relief Act of 2007 is not extended again for this year.

Feel free to contact me if you are upside down on your home and can’t afford to make payments on your mortgage. There are other programs that can help you keep your home.

Kathy Dyer Realtor CABRE #01723710

kdyer@KW.com 831-717-7047

KW Coastal Estates

Carmel Ca. 93923

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Wondering when you can qualify for a home after a short sale? If you are like most people who got caught in the market crash, or had a significant downturn with your finances, and had to short sale; here are some guidelines to help you with your future buying plans. I highly suggest that you talk with a lender as soon as you’re thinking about getting back into the market. A lender will go over your credit report to make sure there are no mistakes and give you suggestions on correcting or improving your credit score.

Waiting periods are based on the loan guidelines with what lender your go with. Most loans are sold to Freddie Mac and Fannie Mae, and if so, your situation would have to conform to their lending guidelines. Below are their guidelines. You would be able to buy sooner if you use a portfolio lender as they do not usually sell their loans out to Freddie and Fanny. In order to qualify, you would need to provide a real hardship for the portfolio loan product. If you want suggestions for portfolio lenders, feel free to give me a call and I will help you find one.

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In the first quarter in 2014, only 11% of the mortgaged homes were upside down. So that means that 1 out of every 9 mortgaged home owner owes more on their mortgage than the value of their home. At the end of the 4th Q in 2013, the percentage of underwater homes were 12.6% compared to the 1st quarter in 2013 which was 21.3%

The majority of the underwater homes are located in the inland areas. These owners are not able to contribute to the economy since an excessive portion of their income goes into debt repayment and above market interest rates. These owners are making mortgage payments greater than the price of what that same home would rent for.

The future forecasts prices slipping back down, so expect to see a rise in the number of underwater homes plunge back down again. According to Core Logic, don’t expect of a full recovery until 2020.

Notice of Defaults “NOD’s” are still high. A notice of default happens when a home owner misses 3 or more mortgage payments. Statistics reveal as of Q1 2014, 38% of NOD recorded go onto foreclosure, as the rest are short sales or Loan Mods.

How long will it take for most homeowners to be solvent again? Home owners who stick it out in their homes, seeing positive equity may take between 10-15 years to see the light of day. It all depends on when they bought their home. For those who purchased at the height of the boom, it may take to 2020 for homeowners to see the beginning of positive equity.

Some people were not able to wait it out to see the light of day. I am a Short Sale Realtor who specializes helping people get out from the burden of a house payment that is killing them. The stress is just not worth it any more. Most just give up after using all their savings and going into more debt thus making things even worse. These people always paid their bills on-time and would never dream about defaulting on their mortgage. It is a devastating decision to stop paying or to receive that first Notice of Default. I see it happen with Doctors, Professionals, Pastors… they are not alone.